Eurozone crisis may trigger wine bubble, say experts

Uncertainty over the viability of the European Monetary Union and volatility of the euro may incite investors to seek refuge in wine, suggest financial experts including John Authers, FT columnist and author of The Fearful Rise of Markets.

While his is a cautionary tale, Authers notes that the scenario offers short-term opportunity for bold and disciplined investors who can spot a potential bubble and sell before it bursts.

‘There are many people who will talk very caustically and matter-of-factly about “can I find the next bubble and can I get into it now”, and there is certainly an interest in treating wine that way,’ he said in a presentation at the London International Wine Fair.

Wine’s attributes as a wasting, hard asset that is not directly correlated to either stocks or bonds make it attractive as a safe haven, like gold.

‘There is a law in economics called Gresham’s Law,’ said Joe Roseman, former hedge fund economist and author of ‘SWAG [Silver Wine Art Gold]: Alternative Investments for the Coming Decade’.

‘Stated simply, it means that bad money drives investors to seek good money,’ he said. ‘In this instance, the bad
money is the euro currency and the good money is an asset like wine.’

Henning Thoresen, CEO of Bordeaux Winebank Group and manager of the €50m Wine Growth Fund, is more cautious, although he has received enquiries regarding the euro’s volatility, mainly from Asia-based investors.

‘We are advising them to stay calm,’ he said. ‘We have a ten-year horizon and I don’t think the eurozone situation will affect wine as a long-term investment. We have large positions in 2005 and 2009. There is no point in flooding the market now.’

There is little sign of a surge in wine investment as yet. The Liv-ex Fine Wine 100 index is down by 22% versus this time last year, while the Liv-exInvestibles index is down by almost 21%. In contrast, the FTSE100 index is down by 11%.